CHAPTER 4 RESULTS
4.5 Investor Relations in Taiwan
4.5.2 Future development
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want to achieve a big and international company scale, which is important for a company aiming at the global market. I think many Taiwan companies want to sell their products to the world but neglect the part of becoming global companies. ” (Interviewee No.5)
4.5.2 Future development
Most IROs think that IR will become more important and the role will change gradually in the future due to the development of company and the investment environment in Taiwan. More companies will improve their relationships with the investment community if they have higher ambitions.
Many interviewees also mentioned about different aspects that IR may go to:
“The market has expected more toward IR. Not just financial disclosure and strategies plans, topics such as corporate responsibility has become more important than before. Both investors and analysts will gradually pay their attentions to these parts.” (Interviewee No.2)
“IR is actually a part of corporate communication. Thus, you can find that many big companies in Taiwan have established a department called ‘corporate communication’ or ‘corporate information’. This is actually an independent unit in many foreign companies. […]Besides corporate communication, there are lots of areas for IR to explore in the future. If there are new topics that investors become interested in, the senior management team must pay attention to them as well. Taking corporate governance for example, there are lots of professional concepts about it and its requirements have become more rigorous. These are all the areas that IR might go to in the future.” (Interviewee No.9)
On the other hand, some interviewees also worry about the development of the stock market in Taiwan since it influences IR’s work intensely.
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“I’m kind of worried about this since our work connects with the stock market closely. Taiwan seems to be marginalized by the global market in recent years. In this situation, foreign investors do not pay much attention to Taiwan now and even brokers are downsizing their staff in Taiwan or moving to Hong Kong. Without these brokers as a promoting channel, IR have to reach their investors by themselves, and it’s not very effective. Secondly, if the effect is limited due to market situation no matter how hard IROs try, companies might question the value of IR. To sum up, many people think that IR has become more important than before and creates larger market capital or better valuation for their companies.
However, if the market becomes smaller and worse, it is not what an individual IR cannot change.” (Interviewee No.5)
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CHAPTER 5
DISCUSSIONS AND CONCLUSIONS
5.1 Discussions
Through in-depth interviews with thirteen senior IROs, all research questions in this study have been answered. For the first research question, the external audiences for IR practitioners in Taiwan include the professional investment community (the sell-side and the buy-side), journalists from mass media and retail investors.
The interaction between IR and journalists is usually neglected by previous research since mass media is not considered the main target audience for IR.
Nevertheless, through in-depth interviews with senior IR practitioners, the current study finds that mass media is an important audience that should not be neglected since reports on mass media influence how the general public and retail investors views a corporation. News reports is an important information source for retailed investors as well as for professional investors. The relationship between IR and mass media is close especially when IR serves as the spokesperson or there is no separate public relations department in the corporation. This responds to Davis’ 2006 research result that both sides, the investment community and the corporations/IR practitioners, still use mass media.
For the second research question, internal audiences of IR include information providers from different departments, the top management, and also the public relations department. According to the interviewees of this study, IR’s relationships and interaction with other departments and the top management is similar to past IR studies by Gregory (1997) and Laskin (2006). All interactions are mainly about information exchange. The co-work between IR and PR teams is also interesting.
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Since they are both image builders and key contacts with external stakeholders for corporations, IR and PR ties closely and sometimes they are placed in a same department with a same supervisor. For corporations without an in-house PR program, IR takes the tasks of IR as well.
It is especially worth noting that information plays a crucial role in all of the issues. The core of IR work is communication, and the communication process is closely connected with the third research question—power relations. The power relations for IR is very unique as IROs need to be able to interact directly with the top management and be supported by all the business units or they might have difficulty when executing their missions. The following section will discuss more in-depth how information connects IR’ relationships with different audiences and how it influences IR’s power relations.
5.1.1 Information, communication and power relations
The roles and the communication function of IR is closely related to the issue of power relations, and all of these center on the transmission of information.
External audiences, especially the investment community, want to receive more information in addition to financial numbers. They care more about the company’s strategic plans, business development and etc. Information is the most important tool that IR has. To receive sufficient information effectively, IR needs to be valued in the corporation and included in a higher level or participate in top management’s meetings, which is determined by the issue of power relations—whether IR is involved in an appropriate position or not.
One of the interviewees, a CFO responsible for IR tasks, discussed the issue
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from a different point of view. He believed that IROs deserve to be positioned in a higher management level or with a better job title not only for information collection but also for the reason that IROs “represent the management team of the company (or the head of BOD him/herself).” (Interviewee No.12) This helps IROs to be more convincing and shows that the company takes IR seriously. Also, if IR cannot provide useful information to the investment community, it is difficult to build up relationships since information is what the investment community wants and the reason why they come to IR.
Besides the top management circle, information from different departments or business units in the corporation is also crucial. If IR is considered important, corporate members will be more willing to help and provide useful information. As one of the interviewee said, “CEO’s perspective on IR is crucial since it determines other heads’ attitudes toward you.” (Interviewee No. 4)
On the other hand, the relationships between IR and other business units should be mutually beneficial. IR practitioners ask other departments or business units for help to get sufficient information while at the same time IR practitioners provide market intelligence insights and opinions from analysts and the market to them.
The interviewees also provided their opinions on another issue of power relations: IR’s participating in decision making circle.
It is true that including IROs in the decision-making circle is important and can be beneficial, but the key is whether IROs can provide useful information and insights. IR has to make the best use of its role as the bridge between stakeholders inside and outside the corporation and gives useful information from the investors
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and the market trends. IR also needs to provide their professional knowledge in terms of topics related to the capital market. In addition to be empowered by the top management, IROs should show their professional competence and “earn their own seat.”
To sum up, IR’s communication function and the issue of power relations rely on not only top management’s empowerment and their perspectives towards IR but also heavily related to how IR practitioners can contribute to internal audiences and to the decision-making circle. The communication channel and the information flow should be two-way (Table 2). IR practitioners need to be valued and empowered by the top management while at the same time they need to prove their worth.
Figure 1 Information Flow.
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5.1.2 Roles of IR
For the fourth research question on the roles of IR in the current study, the frameworks of public relations roles can be applied on the roles of IR. The first one is Broom and Smith’s five public relations roles (1979). As a bridge between audiences from outside and inside the corporation, IR delivers information between different communities (communication facilitator). They collect information, do market intelligent research and design materials and stories to communicate with the investment community (technical services). When crisis or special issues happen, they serve as the expert prescriber and problem-solving facilitator for the management team. IR usually serves as the spokesperson or the member of the spokesperson team. IR represents the senior management and talks with external audiences (acceptant legitimizer).
For the manager-technician roles (Dozier, 1984), IR is a managerial role that manages the relationships with the investment community and their expectations.
IR also delivers information in a designed story and establishes a certain image for the corporation. IROs play the managerial role that make strategic plan for information and corporate image delivery. On the other hand, IR practitioners, especially the junior IR in the team, are also responsible for technical tasks such as routine information disclosure based on the regulations by Taiwan Stock Exchange.
Though the roles of IROs and junior IR are different, which also results to different power relations in corporate structure, all IR practitioners study all the time to catch up with the market trends and develop market intelligence.
Though the roles of IR can be reviewed with the frameworks of public relations’ role studies by large, more academic role studies is needed to clarify and establish a systematical argument since there are still some different functions and
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responsibilities between IR and public relations.
5.1.3 IR in Taiwan
IR has developed for about twenty years in Taiwan. IR now plays a more important role in scaled corporations. Publicly traded companies gradually realize the value of IR and understand that IR is a must-have program if they want to gain capital from foreign investors and push their companies to the global market.
However, there are still some problems should be noted. The first one is related regulations by the governance. Corporate governance has become a trend in the global IR practice in the recent years and the local governance tries to promote the idea and encourage companies to establish their IR system as well.
Nevertheless, some of the policies are too difficult to put into practice for corporations. Interviewee No.8 gave an example of bad policy during the interview.
She said that the governance were worried about the problem of insider trading and required publicly traded companies to record every meeting between IR and the investors. The regulation raised lots of complaints from companies and foreign investors and was canceled quickly since it was not reasonable and practical. There should be more interaction and discussion between IR practitioners, the investment community and Taiwan Stock Exchange when establishing related regulations to prevent similar incidents happen again.
The second issue is the cultivation of talent. In the past when IR was not valued much, IR was a part-time task done by an employee that speaks English.
Nowadays, people noticed that IR plays a more important role that bridges the investment community and the corporations, and it takes professional IR
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practitioners to execute the work well. Most corporations employ an IR with financial backgrounds. However, communication and relationships management skills as well as the practitioners’ own personality is also important. Corporations need to think about how to foster talents and build up an effective communication system or IR team to support IROs to manage their relationships with the investment community. On the other hand, IR is a field that had been neglected by college of commerce and communication for long time. It would be helpful if there are more discussion in the academia and related programs for college students.
5.2 Conclusions
IR is a very unique profession. It centers on communication while at the same time integrates different fields including finance, securities laws, marketing, and knowledge of the industry. The role of IR in corporate structure is also unique. No matter where it is placed, in the finance department, an independent IR department, or in other corporate functions, IR needs to have control of different levels of corporate information, which involved the issue of power relations.
Due to this complex nature of the profession, there is no best answer to IR’s position in corporate structure. It depends on the company’s needs and expectations towards IR. However, IR must be taken seriously and given sufficient help from the top management team if the company truly wants to build up the relationships with their shareholders and improve their position in the capital market.
As mentioned by many interviewees, the work of IR relies a lot on experiences since it requires knowledge of different fields, the practitioners’ personality, the relation building with the investment community, and even the power relations issue
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inside the corporation. It is not so easy to master the mission of IR in a short period of time. There are no programs teaching IR in school; the transmission of IR experiences and training becomes very important for junior IR practitioners.
5.3 Limitations and Future Research
Since there was not much research on the topic of IR profession in Taiwan, the current study serves as an explorative study and there are some limitations should be addressed. Although in-depth interviews help receive detailed opinions and have deeper discussions between the researcher and the interviewee, it is difficult to have a quantitative conclusion without an overall survey.
Moreover, since all the interviewees are very experienced and have been in the occupation for many years, it would be interesting to interview less experienced IR practitioners to see if they have different viewpoints on the topic of IR’s roles and functions. Also, junior IR practitioners may also have different opinions on the issue of power relations in the company due to their level and position.
IR practitioners with different backgrounds other than finance may also have different opinions in terms of their definitions and expectations on the roles and functions of IR. It would be helpful to use quantitative method to examine the correlation between IR’s features such as gender, seniority, corporate scale, corporate structure and etc, as well as their opinions on the different issue.
For future studies from communication college’s point of view, cross cultural research comparing the practice of IR in different markets can be another interesting angle as well. The practice of IR may differ in different markets due to the developments of financial markets as well as culture backgrounds and corporate
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cultures. It would be interesting to understand different styles and characteristics of IR practice. This may be very helpful for institutional investors and investment communities when communicating with IR practitioners of different cultural backgrounds.
In addition, the use of new media as an IR communication tool is a popular topic for recent IR practice and has been discussed in professional IR conferences many times these years. The success of social media and its grand user population attracts IR’s attention. However, using social media is still a proposal that most companies do not considered proper for IR to deliver message. von Alberti-Ahltaybat and Al-Htaybat’s study (2016) had shown the risks of using social media.
Interviewees of this current research shared the same viewpoint and thought it is not practical for IR, at least at this point of time. However, since it has attracted a degree of attention from professional IR practitioners and institutions, and the future development of social media is considerable, the use of social media for IR practice may still be a worth exploring topic in the future.
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